Question: Is a fee of 0.9% fair for managing a $7 million portfolio? And is there room for negotiation?

Answer: As a savvy investor, it’s wise to question the fees you’re paying. While a 0.9% fee falls within the industry average (typically around 1% of assets under management), there is definitely room for negotiation and the potential for a better deal.

Considering the size of your portfolio, it’s likely that you can find a high-quality adviser who charges less than 0.9%. According to Eric Ross at F2 Wealth, “At this level of assets, it’s typically possible to find advisers who charge 0.8% or even lower.” (In search of a financial adviser? Try our tool to find one that meets your needs.)

It’s important to note that as your assets increase, it usually leads to lower advisory fees. Many advisers have a “waterfall” fee schedule that reduces the percentage as your portfolio grows, explains certified financial planner Kaleb Paddock at Ten Talents Financial Planning.

When evaluating whether the fee is reasonable, consider the range of services provided by your adviser. If they solely focus on money management, then yes, a 0.9% annual fee might seem high. However, if they provide comprehensive wealth management services including tax planning, cash flow planning, portfolio management, estate document review, insurance assessment, and even multi-generational planning, then the 0.9% fee may be more justifiable, suggests certified financial planner Bruce Primeau at Summit Wealth Advocates.

Negotiating fees is an essential step to ensure you receive the best value for your money. Remember, it never hurts to ask for a better deal and explore your options.

How to Negotiate with a Financial Adviser

Additional Services and Pricing Models

When negotiating with a financial adviser for a $7 million dollar portfolio, it’s important to consider the additional services included in their pricing. According to Paddock, your adviser should offer tax return filing and preparation as well as an estate attorney on retainer. The value of coordinating your investments, taxes, and estate plan under one group of providers cannot be overstated.

Instead of sticking to a percentage-based pricing model, Paddock suggests negotiating a flat price. Although 0.9% may seem like a small percentage, it adds up to $63,000 per year. As your portfolio grows, so do your fees.

Evaluating the Value Provided

Before finalizing an agreement, it’s worthwhile to evaluate the value provided by the adviser. Hutchins advises that they should be able to justify their price tag by highlighting the value they deliver to other customers. If you find yourself needing to negotiate, it’s a sign that they may not have demonstrated enough value for the cost of their services.

Casting a Wide Net

To get an idea of what other advisers offer, Faber recommends casting a wide net and requesting quotes from multiple sources. Obtaining at least four quotes will help you assess the reasonableness of the fee being proposed.

Fee Considerations

It’s essential to remember that the fee doesn’t necessarily have to apply to the entire portfolio value of $7 million. Faber points out that if a portion of your portfolio is not being actively managed, such as holding 50% in the S&P, 20% in individual municipal bonds, and cash, the fee should only be based on the managed amount which is around $2 million.

Retain these tips in mind when negotiating with a financial adviser for your portfolio.

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